Now that the first week of July has arrived, today is as good a time as any to reflect on the last 12 months of your portfolio's performance.
Of course, 12 months is not an investment timeframe in itself (nor should it be), but it can be a useful period to learn from.
If you're completely happy with how your portfolio is performing, then all you need to do is continue with your existing strategy, but if you're looking back and kicking yourself over errors you think you've made then it's probably best to take some time out and document your thoughts on how you think you can improve.
In a way this is what I'm doing now, and below are the three areas in my own investing life I know I can improve upon for the next 12 months and beyond:
Don't over trade
It's easy to tinker with the portfolio by buying and selling regularly, but doing too much is only going to incur unnecessary transaction costs and capital gains tax (CGT).
In my own situation, I bought and sold 13 times in the last financial year. Two of these trades included the purchase of iSentia Group Ltd (ASX: ISD) at $4.92 (now $3.37) and the sale of Iress Ltd (ASX: IRE) at $9.10 (now $10.87).
You need to find your own balance here, but I firmly believe I incurred too much activity on my account and in doing so have incurred some unnecessary losses for my portfolio.
By buying shares in good businesses and letting the economic fundamentals play out over years you may be lucky enough to find and own gems like Premier Investments Limited (ASX: PMV), Retail Food Group Limited (ASX: RFG) and Pro Medicus Limited (ASX: PME), which have performed admirably for those who simply did nothing more than hold the shares (for years).
Measure your performance
There are a number of good SaaS (software as a service) providers in the market that allow you to record all aspects of your portfolio including offerings from Sharesight or Class Ltd (ASX: CL1).
For me, I still prefer to use my trusty old Excel spreadsheet to record all aspects of my portfolio's performance and I do this on a quarterly and annual basis.
Either way though, there's nothing more motivating than to measure how you're doing, especially when you've experienced market volatility as demonstrated in the chart below:
All Ordinaries index 1 July 2015 – 30 June 2016
Source: Westpac
By measuring your portfolio's performance (both income received and share price movements), you're also giving yourself the opportunity to understand the context of your own portfolio when compared to market movements as illustrated above.
Don't be blind to how your portfolio is performing. You need to know.
Read more
By reading more, I also mean thinking more and spending a reasonable amount of time doing so.
At the top of your list should be your companies' annual reports and any general commentary on the industries they operate in. Additionally there are a number of excellent book recommendations which can be found here.
And if you're new to investing, you can't go past the 13 Steps to Financial Freedom.
By reading more and reading widely, you'll have the benefit of being a more focused investor and less prone to trading rushes which helps with rule number 1 (above).
Foolish takeaway
The bottom line for you own situation should be that you're incrementally increasing your knowledge and improving your temperament over time, so if you've had a poor year then take stock and learn from your experience.
There are a lot of companies' shares on the ASX that don't have to be bought and you can take this literally. If you can incorporate the three steps above into your own investing experience, I firmly believe you'll have built the foundations for a successful, retirement-friendly portfolio that will treat you well in the years ahead.
